Tuesday, April 13, 2010

Sell the Earnings News?

Bearish Wolfe Waves have not triggered very often for this latest uptrend since Feb 5th, but the set-up has reappeared yet again. On April 7th to 8th, the Bearish Wolfe triggered and got to the second target area for a small profit.

Now, on the 65-minute chart, we had an evening star doji Monday at 3pm and a bearish confirmation into the final hour. This is similar to any test of top with a blow off that comes back into the trend channel: the same idea as a Trader Vic2b. With this relentless low-volume rally, only the first or second target has been met on these small pullbacks. My "feeling", however, is that this bearish Wolfe can give us a deeper pullback this time... and Eric has sentiment pegged. Newsweek even gave us a beautiful cover!

Let's review: Fundamentals are fair value or slightly overpriced; Technicals call for a pullback (we are even at Wave 5 from teh Feb motive impulse); Sentiment is wild, bordering on ejaculatory.

I'll go short and take one-quarter profits at each of the specified four targets. The stop will start at 120.05 and be ratcheted down accordingly to protect profits. Stalking a top like this takes discipline and patience or you'll die the thousand cuts.... be faithful to the stops! My longs are still running, btw, with Teresa Lo's Dollar Core Portfolio fully funded and my IRA has the four Dogs of the the Dow.